Economic Economic Recovery and Recovery and

European UnityEuropean Unity1945-20011945-2001

Chapter 31-1Chapter 31-1

Post-War Economic Post-War Economic EffortsEfforts

1944 Bretton1944 Bretton Woods Conference: Woods Conference: Lay the foundations for the modern Lay the foundations for the modern international monetary systeminternational monetary system

GATT: GATT: General Agreements of Tariff General Agreements of Tariff and Trade lowered tariffs and other and Trade lowered tariffs and other trade restrictions to stimulate trade restrictions to stimulate international tradeinternational trade

Economics 1945-2001Economics 1945-2001

Between 1958 and 1971 the value of Between 1958 and 1971 the value of national currencies was based on gold national currencies was based on gold and the U.S. dollarand the U.S. dollar

International Monetary Fund International Monetary Fund (IMF) (IMF) Was designed to provide short-term Was designed to provide short-term

loans to struggling countries to loans to struggling countries to prevent economic crisis and anarchyprevent economic crisis and anarchy

Became important in the post-war Became important in the post-war economic boomeconomic boom

Post-War EconomicsPost-War Economics

The World BankThe World Bank: : Provided long-term loans to Provided long-term loans to

countries for economic growthcountries for economic growth

Post-War Political EffortsPost-War Political Efforts The United Nations: The United Nations: (UN) 1945(UN) 1945

The framework of the UN was agreed The framework of the UN was agreed upon by the allies at the Yalta Conferenceupon by the allies at the Yalta Conference

The Security CouncilThe Security Council: Consisted of 12 : Consisted of 12 nations (including 5 permanent members: nations (including 5 permanent members: U.S., Britain, France, Nationalist China, U.S., Britain, France, Nationalist China, USSR) that had the authority to maintain USSR) that had the authority to maintain world peaceworld peace

The UN The UN continuedcontinued

The General Assembly:The General Assembly:

Included every country in the worldIncluded every country in the world Had the power to advise but could Had the power to advise but could

not enforce recommendationsnot enforce recommendations

Post-War Economic and Post-War Economic and Political RecoveryPolitical Recovery

Great post-war economic hardship:Great post-war economic hardship: Scarcity of food, runaway inflation, Scarcity of food, runaway inflation,

black markets plagued the economyblack markets plagued the economy Many of Europe’s important cities were Many of Europe’s important cities were

in ruinsin ruins Many believed that Europe was a gonerMany believed that Europe was a goner Recovery seemed impossibleRecovery seemed impossible Suffering was the worst in GermanySuffering was the worst in Germany

Political RestructuringPolitical Restructuring

Christian DemocratsChristian Democrats emerged as a emerged as a dominant political movement in several dominant political movement in several countriescountries

Saw a common Christian and European Saw a common Christian and European heritageheritage

Rejected authoritarianism and narrow Rejected authoritarianism and narrow nationalismnationalism

Had faith in democracy and cooperationHad faith in democracy and cooperation Catholic parties were progressive in Catholic parties were progressive in

naturenature

Political RestructuringPolitical Restructuring

Socialist and communist parties Socialist and communist parties emerged with increasing power and emerged with increasing power and prestige; especially in France and Italyprestige; especially in France and Italy

Pushed for social change and economic Pushed for social change and economic reform with some successreform with some success

SO…social reform and political SO…social reform and political transformation created the foundation transformation created the foundation for a European Renaissancefor a European Renaissance

ItalyItaly

Christian Democrats gained control Christian Democrats gained control in 1946in 1946

Were led by Were led by De GasperiDe Gasperi

Much socialist influence: average Much socialist influence: average worker’s wages included social worker’s wages included social benefitsbenefits

FranceFrance General Charles de GaulleGeneral Charles de Gaulle (leader of the (leader of the

Free French movement) led the Fourth Free French movement) led the Fourth Republic from 1946-1958Republic from 1946-1958

The real power in the legislatureThe real power in the legislature President was mostly a ceremonial positionPresident was mostly a ceremonial position The Catholic Party big in FranceThe Catholic Party big in France Big socialist influence: Industries were Big socialist influence: Industries were

nationalizednationalized The 5The 5thth Republic gave the President more Republic gave the President more

powerpower

BritainBritain

Clement AtleeClement Atlee led the Labour Party. led the Labour Party. Defeated Churchill and the Defeated Churchill and the

Conservatives in 1945Conservatives in 1945 Atlee moved to the establishment of a Atlee moved to the establishment of a

welfare statewelfare state Many industries were nationalizedMany industries were nationalized All citizens had free medical.All citizens had free medical. Middle and Upper Classes taxed Middle and Upper Classes taxed

heavilyheavily

The Federal Republic of The Federal Republic of Germany (West Germany)Germany (West Germany)

After 1949 led by After 1949 led by Conrad AdenaurConrad Adenaur Christian Democrats became the Christian Democrats became the

major party for a generationmajor party for a generation

Economic RecoveryEconomic Recovery

Europe began a period of Europe began a period of unprecedented economic growth that unprecedented economic growth that continued into the late 1960’scontinued into the late 1960’s

By 1963 Western Europe produced more By 1963 Western Europe produced more than 2.5 times more than before the warthan 2.5 times more than before the war

In many countries workers were willing In many countries workers were willing to work for low wages = expansion of to work for low wages = expansion of industryindustry

= lower prices & higher demand= lower prices & higher demand

Reasons for Economic Reasons for Economic Recovery:Recovery:

The Marshall Plan: The Marshall Plan: The U.S. sent The U.S. sent substantial aid to Europe beginning in substantial aid to Europe beginning in 19471947

Economic growth became a basic Economic growth became a basic objective of most European governmentsobjective of most European governments

Governments accepted Governments accepted Keynesian Keynesian economics economics to stimulate their economiesto stimulate their economies

Governments more willing to use deficit Governments more willing to use deficit spending to make more resources spending to make more resources available to the peopleavailable to the people

Reasons for Economic Reasons for Economic Growth Growth continuedcontinued

The “Economic Miracle” was also The “Economic Miracle” was also due to the elimination of economic due to the elimination of economic barriers (like tariffs)barriers (like tariffs)

Result: A large unified market Result: A large unified market emerged: The emerged: The Common MarketCommon Market

Economics: West Economics: West GermanyGermany

Ludwig Erhard Ludwig Erhard Finance ministerFinance minister Combined a free market economy Combined a free market economy

and extensive social welfare (the and extensive social welfare (the latter inherited from the Nazi era)latter inherited from the Nazi era)

Economics: FranceEconomics: France

Jean Monnet Jean Monnet (architect of European (architect of European Unity)Unity)

France used Marshall Plan aid and France used Marshall Plan aid and nationalized banks to funnel $ into nationalized banks to funnel $ into key industrieskey industries

Achieved the most rapid economic Achieved the most rapid economic development in French historydevelopment in French history

Used a “mixed” state and private Used a “mixed” state and private economyeconomy

The Welfare StateThe Welfare State

Western European countries worked to Western European countries worked to provide universal services to their provide universal services to their citizens:citizens:

EmploymentEmployment Unemployment and disability insuranceUnemployment and disability insurance Social Security for the elderlySocial Security for the elderly Free or subsidized health careFree or subsidized health care Paid for by wealthier citizensPaid for by wealthier citizens

The Welfare StateThe Welfare State

Benefits were universal; not just for Benefits were universal; not just for the poorthe poor

As long as economies continued to As long as economies continued to expand, the cost of the welfare state expand, the cost of the welfare state were easily met by the governmentwere easily met by the government

Britain (Atlee) the Britain (Atlee) the Labour PartyLabour Party

Britain was the model for the Welfare Britain was the model for the Welfare StateState

Nationalized: The Bank of England, coal Nationalized: The Bank of England, coal mines, electricity, gas, iron and steel mines, electricity, gas, iron and steel industriesindustries

Increased unemployment insurance, old Increased unemployment insurance, old age pensions, universal health care, age pensions, universal health care, workers compensationworkers compensation

Increased a progressive income tax and Increased a progressive income tax and inheritance taxesinheritance taxes

80% of industry was still private80% of industry was still private

BritainBritain

1951-1964 Conservatives took 1951-1964 Conservatives took power and privatized more power and privatized more industries but kept the welfare stateindustries but kept the welfare state

Economic Downturn and Economic Downturn and High inflation in the 1970’sHigh inflation in the 1970’s

Caused larger deficits, increased national Caused larger deficits, increased national debts and pressure from conservatives to debts and pressure from conservatives to lower taxeslower taxes

Conservatives argued that the welfare state Conservatives argued that the welfare state had become too large and the taxes were had become too large and the taxes were excessiveexcessive

High taxes were stunting economic growthHigh taxes were stunting economic growth So all over Europe, the welfare state was So all over Europe, the welfare state was

modified and more privatizationmodified and more privatization

Immigration of Guest Immigration of Guest WorkersWorkers

Western Europe’s dramatic economic Western Europe’s dramatic economic revival and low birth rate led to a revival and low birth rate led to a shortage of workersshortage of workers

The need was filled by immigrants from The need was filled by immigrants from Turkey, Greece, the Balkans, and North Turkey, Greece, the Balkans, and North Africa…also from Spain, Portugal, ItalyAfrica…also from Spain, Portugal, Italy

Many did not return homeMany did not return home

ImmigrantsImmigrants Great BritainGreat Britain had many immigrants from had many immigrants from

India, Pakistan, Africa and the CaribbeanIndia, Pakistan, Africa and the Caribbean FranceFrance had large numbers from Algeria had large numbers from Algeria The NetherlandsThe Netherlands had many from Indonesia had many from Indonesia

Eventually, nationalists became concerned Eventually, nationalists became concerned over the impact of immigrants on national over the impact of immigrants on national cultures and put pressure on their cultures and put pressure on their governments to restrict immigrationgovernments to restrict immigration

European UnityEuropean Unity

Attempts to unify Europe in 3 areasAttempts to unify Europe in 3 areas

1.1. Political: Political: The Council of EuropeThe Council of Europe: : did represent nearly every European did represent nearly every European nation but had little influencenation but had little influence

2.2. Military: Never really happenedMilitary: Never really happened

3.3. Economic: Most successful with Economic: Most successful with the EU and its precursors: ECSC, the EU and its precursors: ECSC, EEC, ECEEC, EC

The Council of EuropeThe Council of Europe

European federalists hoped that the European federalists hoped that the Council would evolve into a true Council would evolve into a true European Parliament with European Parliament with sovereigntysovereignty

But Britain was opposed to giving But Britain was opposed to giving the Council any real power due to its the Council any real power due to its “special relationship” with the “special relationship” with the United StatesUnited States

1950 The Schuman Plan 1950 The Schuman Plan

Organized by French (Monnet) and Organized by French (Monnet) and German (Schuman)German (Schuman)

Created the ECSC: the European Coal Created the ECSC: the European Coal and Steel Communityand Steel Community

Was an international organization to Was an international organization to control and integrate European coal and control and integrate European coal and steel productionsteel production

Members: West Germany, Italy, Belgium, Members: West Germany, Italy, Belgium, the Netherlands and Luxembourgthe Netherlands and Luxembourg

The ECSC The ECSC continuedcontinued

The Goal: a single competitive market The Goal: a single competitive market without national tariffs or quotaswithout national tariffs or quotas

““The Six” (by 1958)The Six” (by 1958)

Long-term Goal: To bind the members Long-term Goal: To bind the members so closely economically that war so closely economically that war between them would be unthinkable between them would be unthinkable

The EECThe EEC

The The Treaty of RomeTreaty of Rome 1957 created the 1957 created the EuropeanEuropean Economic CommunityEconomic Community…signed …signed by The Sixby The Six

Goal to create a single market by Goal to create a single market by gradually reducing tariffs among The Sixgradually reducing tariffs among The Six

Treaty also created Treaty also created Euratom: The Euratom: The European Atomic Energy Agency: European Atomic Energy Agency: to to develop and regulate nuclear energydevelop and regulate nuclear energy

COMECOMCOMECOM

Above was the Soviet version of Above was the Soviet version of EuratomEuratom

Other goals of the EECOther goals of the EEC

Free movement of capital and labor Free movement of capital and labor across bordersacross borders

Common economic policies and Common economic policies and institutionsinstitutions

Reduced tariffsReduced tariffs

All above encouraged hopes of All above encouraged hopes of political and economic unionpolitical and economic union

The Rise of NationalismThe Rise of Nationalism

The Rise of Nationalism in the 1960’s The Rise of Nationalism in the 1960’s frustrated the hopes for European frustrated the hopes for European unityunity

Charles de Gaulle returned to power Charles de Gaulle returned to power with the Fifth Republic and withdrew with the Fifth Republic and withdrew France from NATOFrance from NATO

He believed that the U.S. had too He believed that the U.S. had too much influence in NATOmuch influence in NATO

De GaulleDe Gaulle

De Gaulle also twice vetoed the De Gaulle also twice vetoed the entrance of Great Britain into the entrance of Great Britain into the European UnionEuropean Union

He believed Britain too pro-He believed Britain too pro-AmericanAmerican

Britain entered the EU in 1973Britain entered the EU in 1973

1992 The EU1992 The EU

German Chancellor Kohl and French German Chancellor Kohl and French President Mitterand wanted to President Mitterand wanted to extend the EU to include a single extend the EU to include a single European currency and a common European currency and a common defense and foreign policydefense and foreign policy

British PM Margaret Thatcher had British PM Margaret Thatcher had been opposed to joining the EU but been opposed to joining the EU but was replaced in 1990 by John Majorwas replaced in 1990 by John Major

The Maastricht Treaty The Maastricht Treaty 19911991

The Eurodollar was introducedThe Eurodollar was introduced Became the single currency of the EU Became the single currency of the EU

in 2002in 2002 Integrated the currency of 12 European Integrated the currency of 12 European

nationsnations Was organized by the EMU (European Was organized by the EMU (European

Monetary Union)Monetary Union)

Britain refused to join the EMUBritain refused to join the EMU

The EUThe EU

By 1995 had 15 members (Britain By 1995 had 15 members (Britain WAS a member but refused to use the WAS a member but refused to use the euro)euro)

By 2005 10 more membersBy 2005 10 more members In 2007 2 more membersIn 2007 2 more members

( Actually its formal name was the EC ( Actually its formal name was the EC until 1996 when its name changed to until 1996 when its name changed to the EU)the EU)

The Economic Crisis of The Economic Crisis of the 1970’sthe 1970’s

1971 The U.S. (under Nixon) went off 1971 The U.S. (under Nixon) went off of the gold standardof the gold standard

This ended the Bretton Woods system This ended the Bretton Woods system of international currency stabilizationof international currency stabilization

Fixed rates of exchange were Fixed rates of exchange were abandonedabandoned

Led to a great uncertaintyLed to a great uncertainty

The Energy CrisisThe Energy Crisis

The post-war economic boom was The post-war economic boom was partially due to availability of cheap oilpartially due to availability of cheap oil

1973 OPEC (Organization of 1973 OPEC (Organization of Petroleum Exporting Countries) Petroleum Exporting Countries) dramatically increased the price of oil dramatically increased the price of oil in the U.S. and in Europe due to their in the U.S. and in Europe due to their support of Israel in the Yom Kippur support of Israel in the Yom Kippur War of that same yearWar of that same year

OPECOPEC

Raised the price of oil again in 1979 Raised the price of oil again in 1979 during the Iranian Revolutionduring the Iranian Revolution

The increase in the price of oil, The increase in the price of oil, coupled with the upheaval in the coupled with the upheaval in the international monetary system international monetary system plunged the world into the worst plunged the world into the worst economic decline since the 1930’seconomic decline since the 1930’s

Stagflation in the mid Stagflation in the mid 1970’s1970’s

= increasing unemployment during = increasing unemployment during increased inflationary period…unusualincreased inflationary period…unusual

USUALLY unemployment and inflation USUALLY unemployment and inflation have the opposite relationshiphave the opposite relationship

1970’s and 1980’s: debts and deficits 1970’s and 1980’s: debts and deficits increased dramaticallyincreased dramatically